If supervisors are of the opinion that your company is insufficiently compliant with laws and regulations, they may impose an enforcement decision. You can object to a regulator’s decision and possibly appeal directly to the courts. However, you can often contact the supervisor prior to the decision, such as when you give your views in response to a proposed decision.
Below is an overview of the various enforcement decisions the supervisor can take. We also explain your options for appealing the decisions and what is important in doing so.
Regulators, such as the Financial Markets Authority (AFM), De Nederlandsche Bank (DNB) and the Personal Data Authority (AP), are administrative bodies, as referred to in Article 1:1 of the General Administrative Law Act (Awb). In the context of their supervision, they can take decisions, as defined in this article. Enforcement by the supervisor may be aimed at remedying the violation, such as issuing a direction or an order under penalty. In addition, enforcement action may be aimed at punishing the violator, such as the imposition of an administrative fine.
Before the supervisor makes an enforcement decision, a thorough investigation takes place. Namely, it must be determined that there is (presumably) a violation. That investigation result is sent to the suspected violator in the form of a report, together with the intention to impose an enforcement decision. We refer to this as the intention to issue a designation for convenience, but this applies to all “intention letters. At the same time, the opportunity is given to give a written or oral opinion on the intended decision (pursuant to Article 4:8/4:9 of the Awb). Giving this opinion may be omitted in some cases, for example if the decision is urgent (pursuant to Article 4:11 of the Awb).
Especially at this stage it is very important to give a substantive reaction to the facts that the supervisor has taken as a starting point. In this, you can state in a businesslike and concise manner what, in your opinion, is not correct or incomplete and especially why this is so. If the supervisor adopts your presentation of the facts and the opinion based on it (in part), this may result in the supervisor refraining from taking the intended (enforcement) decision or taking fewer or different facts into account.
There are a number of rules that require special attention for the different types of enforcement decisions. Does it involve a fine decision? Then the basic principle is that you do not have to cooperate with your own conviction. Also, in certain cases, the supervisor must grant you cautions (i.e., notification must be given that you are no longer required to answer questions). This does not alter the fact that you will (continue to) have to hand over certain data that exist independently of your will. Also consider, for example, the amount of the (intended) order under penalty, the ordered (remedial) measures and the reasonable period that must be granted to take them. These are often complex matters in which, in addition to all other aspects of having a dispute with the supervisor, it is wise to seek timely external advice on how to proceed.
When you receive an enforcement decision from the supervisor, there is usually a paragraph at the end about legal protection: “The possibility of objection is available against this decision.” In addition to objection, there is also the possibility of requesting a preliminary injunction and lodging a direct appeal to the competent court. The different steps are explained below.
You file an objection with the supervisor who took the decision. In doing so, you indicate the decision you object to and what your objection consists of (the grounds for objection). These objections may be substantive or procedural. You must give reasons for your disagreement and why. If you do not substantiate your objection and only state, for example, “I don’t think I have broken the law” or “I don’t think it is justified that I am being fined for this”, the administrative body cannot respond to this in terms of content.
Within 6 weeks at the latest
It is important that you object within 6 weeks of the date of the decision. These are so-called ‘public order terms’. If you file an objection at a later date, the objection will in principle not be dealt with (declared inadmissible) because the deadline has been exceeded, unless you can give good reasons for exceeding the deadline (it is ‘excusable’). In practice, however, this is subject to strict requirements. For example, the justification “The letter has been in the mail for two weeks, because I really did put it in the mailbox on time” does not count as ‘excusable’. Given the importance of timely filing, you should have sent a registered letter before the end of the deadline, receiving proof that and when the letter was received by the supervisor (also called the “receipt theory,” as opposed to the “mailing theory”). The objection must then be received by the relevant supervisor no later than one week after the 6-week objection period ends.
Pro-forma objection
What you can do if you need a little more time to submit a proper (substantiated) substantive objection is to first submit a so-called ‘pro-forma’ objection within the objection period. Then you indicate in advance that you object to the decision and why, but ask the supervisor for more time to supplement the grounds of this objection. As a rule, he will then grant you an additional period of four weeks, unless the administrative body is of the opinion that the postponement can be shorter.
Filing a “pro forma” objection provides more time to further supplement the grounds of your objection
The objection procedure
What happens in the objection procedure? In an objection, the decision as taken by the supervisor is reconsidered, primarily on the basis of the grounds for the objection as you have put forward. But the supervisor can also review (‘ex officio’) certain parts of the decision. Part of the reconsideration is that you are given the opportunity to be heard. Such hearings often involve an objection committee. A report is made of the hearing, which is part of the objection file. Be careful: it is not allowed to introduce new grounds for objection during the hearing. Therefore, always make sure that you include all parts of the decision you wish to appeal in the notice of objection.
Under the Awb, the notice of objection may not be handled by the person who made the decision against which the objection is directed (also known as the primary decision). After all, then there would not be the necessary objective reconsideration thereof.
As the final part of the objection procedure, you will receive the decision on the objection. There are two possible outcomes. The supervisor:
The consequence of the first option is that the primary decision is overturned and replaced by the new decision. Under option two, the primary decision remains in place. .
You can also lodge an appeal against the decision on an objection with the (administrative law sector of the) competent court. At the AFM and DNB this is in principle the District Court of Rotterdam. There is a single exception to this, for example appeals regarding decisions on public offers must be filed with the District Court of Amsterdam. At the AP, this is the (administrative law sector of the) court of the interested party’s place of residence. See below for more information on the appeal process.
An important rule is that objecting should not put you in a worse position than if you had not objected.
In certain cases it is permitted to “skip” the objection phase and, as the objector, you may request the administrative body to agree to direct appeal to the administrative court (pursuant to Article 7:1a of the Awb). The law offers this option only to the objector and the administrative body must agree to request direct appeal.
If you do not agree with (parts of) the decision on the objection of the AFM or DNB, you can appeal within six weeks after the date thereof to the District Court of Rotterdam (as a rule, therefore, with the exception of a single decision). If this appeal does not have the desired outcome, you can then appeal to the CBb. For the AP, these are respectively the court of the interested party’s place of residence and the Administrative Law Division of the Council of State.
You are the plaintiff in the appeal and submit a notice of appeal. The supervisor is the defendant and files a statement of defense. A hearing date is set by the court or the CBb and on this day and at this time your case is then dealt with substantively.
This procedure first assesses whether the (higher) appeal is admissible. Is this the right judge? Has the correct procedure been followed and has a timely (higher) appeal been lodged (see also the above stated under objection about exceeding the term)? Next, the judge rules on the basis of what has been raised in the notice of appeal. It may itself add further (ex officio) facts or grounds. Again, it is important that you think carefully in advance about what you want to raise. Which matters from the decision on your appeal or the ruling of the appellate court you want to bring up for discussion and especially why.
Declared founded, and now what?
If the (higher) appeal is upheld (and you are proven right), the contested decision (the decision on the objection) will be annulled, or partially annulled. A number of scenarios are conceivable here: the court or the CBb can itself decide the case (and thus indicate what the new decision entails) or give the supervisor the opportunity to repair a defect in the decision or order it to take a new decision in compliance with the ruling. Another scenario is a declaration of the merits with the legal consequences being upheld. A special rule applies to administrative fines; when the court or the CBb rules in your favor and declares the (higher) appeal (partially) well-founded, the court or the CBb must make a new decision and thereby redetermine the amount of the fine. Again, the fine may not be higher than determined by the administrative body in the contested decision.
It is important to note that filing a notice of objection or lodging an appeal does not, in principle, suspend the effect of the decision during the objection or appeal procedure (unless otherwise provided by law, as in the case of the obligation to pay an administrative fine under the Wft). If you are of the opinion that there is an urgent interest for you to obtain clarity about your legal position quickly(er), there is the possibility to request a preliminary injunction from the preliminary relief judge. The procedural requirement is that you must have filed a notice of objection with the supervisor or a notice of appeal with the court by the time you request the preliminary injunction. What you actually do with a preliminary injunction is ask the court to suspend (the effect of) the decision taken until the objection or appeal has been decided. This is to avoid having to take irreversible measures. For example, consider the decision to revoke the permit due to alleged violations of laws and regulations. Thus, the injunction, as the name suggests, is always temporary in nature.
It is especially important to properly substantiate the required urgency of the requested remedy, otherwise your request will almost certainly be denied. Case law on this concept is quite “casuistic” (from case to case with different outcomes). Therefore, get timely and proper information regarding the legal feasibility of such a request.
As you read above, the imposition of fines can lead to lengthy, costly legal proceedings. To speed up this process, since February 1, 2022, the AFM has a procedure for simplified fining.
In our monthly Risk & Compliance newsletter, we often dive into interesting cases in which financial institutions object to enforcement decisions by the regulator. If you want to receive these articles in your mailbox, you can subscribe to our newsletter now.
Projective Group advises and assists you in your communication with the regulator, so that your good reputation is maintained and disputes are avoided as much as possible. Litigation against the regulator is never an end in itself for us. If you call on us in response to a (proposed) enforcement decision, we will provide you with sound procedural advice in good time. Should it nevertheless come to litigation, our experienced consultants will provide you with expert and reliable legal representation.
Do you have questions about dispute resolution with the regulator or would you like to spar with one of our specialists? If so, please contact us without obligation.
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